The Impact of FDI, Cross-Border Mergers and Acquisitions, and Greenfield Investments on Economic Growth

The IUP Journal of Business Strategy, Vol. VII, No. 4, pp. 24-44, December 2010

Posted: 22 Feb 2011

See all articles by Paula Neto

Paula Neto

ISCA - University of Aveiro

António Brandão

Universidade do Porto - Faculdade de Economia (FEP)

Antonio Melo Cerqueira

Universidade do Porto - Faculdade de Economia (FEP)

Date Written: December 2010

Abstract

This paper investigates whether aggregate Foreign Direct Investment (FDI), cross-border Mergers and Acquisitions (M&A) and greenfield investments affect economic growth, based on a panel data of 53 countries over the period 1996-2006. Both causality tests and single growth equations are applied to examine this relationship. The evidence suggests that there is bidirectional causality between FDI, M&A and growth. It also suggests that economic growth Granger causes greenfields, but the reverse is not true. The estimation of the growth equation leads us to conclude that FDI through greenfield investments exerts a positive impact on economic growth in both developed and developing countries. Conversely, M&A have a negative effect on the economic growth of developing countries, but insignificant on developed countries.

Suggested Citation

Neto, Paula and Brandao, Antonio and Cerqueira, Antonio Melo, The Impact of FDI, Cross-Border Mergers and Acquisitions, and Greenfield Investments on Economic Growth (December 2010). The IUP Journal of Business Strategy, Vol. VII, No. 4, pp. 24-44, December 2010, Available at SSRN: https://ssrn.com/abstract=1765844

Paula Neto (Contact Author)

ISCA - University of Aveiro ( email )

Rua Associação Humanitária Bombeiros de Aveiro
Aveiro, 3800
Portugal

Antonio Brandao

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

Antonio Melo Cerqueira

Universidade do Porto - Faculdade de Economia (FEP) ( email )

Rua Roberto Frias
s/n
Porto, 4200-464
Portugal

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